Greetings, Agents of Impact!
Featured: Catalytic Capital
To finance Indigenous communities, capitalize Native-led investment funds and nonprofits. A loan for sustainable eel farming in Maine. Small business financing for Indigenous women. Collateral-free kinship lending on the Navajo Nation. More than 70 Native-led community development financial institutions, or CDFIs, along with funds and nonprofits are opening new channels of capital for Indigenous communities. They’re also working to reverse a decades-long decline in funding for Indigenous communities. The growing ecosystem of Native-led intermediaries represents a breakthrough in access to finance in Indian Country. “There’s always been a hit or miss between Native entrepreneurial goals and capital goals,” says Kate Finn of First People’s Worldwide, an author of the report, “Indigenizing Catalytic Capital.” “Now there are some very strong Native-led intermediaries with the trust and ability to deliver capital in ways that are consonant with Indigenous leadership and self-determination.”
- Funding the funders. Over two decades, the nonprofit Oweesta Corp. has built the capacity of Native-led CDFIs and lenders with low-cost capital and business support. Its portfolio includes NDN Collective, which invested in an eel farming venture by the Passamaquoddy Tribe in Maine; and the Lakota Federal Credit Union, which created a bank-on-wheels for residents of the Pine Ridge Reservation in South Dakota. Oweesta in January provided $4 million to expand the mortgage and business lending capacity of the Council for Native Hawaiian Advancement, which has been raising and directing donor support to Native communities affected by the wildfires in Maui.
- Investing in women. Albuquerque-based Native Women Lead is tackling the lack of access to capital for Native women-led businesses with “relationship-based” funds for business owners at different stages of growth. A grant from Comcast will kick-start a new fund for larger businesses. “These types of catalytic funding are helpful not just for our capacity, but for our grace,” Native Women Lead’s Jaime Gloshay told ImpactAlpha in April (see, “For female fund managers, catalytic grants are about more than money”).
- Tapping federal funding. Navajo-led Change Labs has delivered business support services and workshops to the largest tribal reservation in the US for nearly a decade. In June, it opened the doors of its Tuba City-based entrepreneurship hub. “It’s a symbol of permanency,” Change Labs’ Heather Fleming told ImpactAlpha (see, “Agent of Impact, Heather Fleming”). The organization has its sights on the $89 million earmarked for Navajo businesses under the American Rescue Plan’s State Small Business Credit Initiative. Change Labs’ proposal includes a collateral-free kinship lending program with Nusenda Credit Union; a matching loan fund with Native Community Capital; and an equity-based micro-venture fund for Navajo entrepreneurs.
- Keep reading, “To finance Indigenous communities, capitalize Native-led investment funds and nonprofits,” by Jessica Pothering on ImpactAlpha.
- Tomorrow’s Call. Oweesta’s Chrystel Cornelius will join First Peoples Worldwide’s Kate Finn, Navajo Power’s Brett Isaac, and Siċaŋġu Co’s Clay Colombe, along with MacArthur Foundation’s John Balbach and other Agents of Impact, to discuss the how as well as the why of investing in Native communities, tomorrow, Aug. 23, at 10am PT / 1pm ET / 6pm London. RSVP now.
Dealflow: Ownership Economy
Teamshares raises $245 million for small business employee stock ownership. Brooklyn-based Teamshares is looking to build a national portfolio of 10,000 employee-owned small businesses. The opportunity: the “silver tsunami” of small businesses that “face a 70% failure rate when trying to sell and rarely transition within a family anymore,” said Teamshares’ Michael Sutherland Brown, a former Wall Street executive and small business owner who co-founded the company with Alex Eu and Kevin Shiiba in 2018. Teamshares has bought out 84 retiring small business owners, transitioning ownership to 2,100 employees (see, “Employee ownership as a competitive advantage”). Teamshares says employee owners in its current portfolio own $27 million in shares and have earned more than $1 million in dividends; the company’s ambition is to create $10 billion in employee wealth.
- Majority ownership. Teamshares buys profitable small businesses with annual revenues of $1 million to $10 million. Upon deal closing, it issues 10% of equity in the newly-acquired business to employees. Teamshares creates a path to majority employee ownership, as cash flow is used to repurchase and retire up to 80% of the company’s stock; Teamshares retains the other 20%. Employees, who have the option to retire and cash in on equity, remain owners alongside Teamshares.
- Growth equity funding. Teamshares’ employee-owned portfolio includes Massachusetts-based auto repair shop Brad’s Service Center (related: “A Utah auto shop demonstrates a pathway to worker ownership via a perpetual purpose trust”). Other transitions include Nebraska-based fast food chain Don & Millie’s, and Thielen Meats, a butcher shop in Minnesota. “Employee ownership aligns the interests of all stakeholders and makes companies better off financially,” said Frank Rotman of QED Investors, which led part of Teamshares’ $245 million raise. Participating investors include Khosla Ventures, Inspired Capital, Union Square Ventures and Spark Capital.
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Kennedy cousin invests in disability services. The opportunity to address challenges of people with disabilities is attracting entrepreneurs – and investors (see, “The impact case for bridging financing gaps for disabled founders”). The latest example: Christopher McKelvy, a grandson of Patricia Kennedy Lawford, who has launched K. Ventures with former JPMorgan banker Judd Olanoff. The investment firm is looking to raise $35 million to invest in startups that provide services for the more than 42 million Americans with disabilities. Globally, some 1.8 billion people identify as disabled. “My family’s hope is that K. Ventures will be the next chapter” of its work on behalf of disabled individuals, McKelvy told The New York Times. K. Ventures has made investments in NeuroNav, a Stanford spin-off that helps disabled Californians access state benefits, and Juno, an insurance provider for parents of children with disabilities.
- Inclusive design. Sorenson Impact’s Jim Sorenson and former disabilities lawyer Regina Kline created Enable Ventures to fund growth-stage ventures founded by, for or with people with disabilities. Design for disability “really is inherently better design,” Kline told ImpactAlpha. “The founders that we see every day are designing inclusively to reach more people.” 2Gether-International, a Washington, DC-based impact accelerator that supports entrepreneurs with disabilities, has raised over $1 million towards a $5 million fund for disabled founders. Ibrahim Rashid, who as a student was impacted by long Covid, built Strong Haulers, an app to help Covid long-haulers manage their symptoms.
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Dealflow overflow. Other news crossing our desks:
- Zanifu raised $11.2 million in a pre-Series A round, backed by Founders Factory Africa and Google Black Founders Fund, to expand access to credit to small retailers and distributors in Kenya. (TechCrunch)
- Minneapolis-based virtual health clinic Visana Health scored $10.1 million in seed financing to provide value-based care to women. (Visana Health)
- Germany’s Leonardo snagged €555,000 ($605,000) in pre-seed funding for science-based sustainability and impact data collection and verification. (EU-Startups)
Six Short Signals: What We’re Reading
📉 Engine No. 1’s rolling retreat. Two years after Engine No. 1 bested ExxonMobil to secure board seats with a demand to address climate change (and one year after ImpactAlpha flagged a shift in the firm’s approach), the hedge fund has sold off its “Transform Climate ETF,” and is focusing on private deals with no public proxy fights, including its latest investment in a Brazilian mining company. (Financial Times)
- Agent of Impact view. The story is about more than Engine No. 1, argues Rachel Robasciotti of Adasina Social Capital. “Who leads the impact work we support matters,” she says. “As we work toward systems change, we must center the voices of those most impacted by the issues we want to solve.”
🏳️🌈 Demand for LGBTQ+ investing. Close to half of all US investors (45%) are interested in a broad range of investable products and strategies that advance LGBTQ+ equity and inclusion. Demand will likely increase as wealth transfers in the coming decades to younger generations. (Morgan Stanley)
🙋🏾♀️🙋🏾🙋🏽♀️🙋🏻 70+ VCs stand with Fearless Fund. The venture investors launched a Change.org petition that has garnered more than 700 signatures as of Monday. “We will not be deterred from our work,” say the general partners, many of them Black women and diversity-focused capital allocators. “We have work to do, lives to impact, funds to raise, and firms to build.” (Change.org)
🌲🌲🌲🌲 What slows deforestation. Protected areas consistently have lower rates of deforestation. Additional protections: When a forested area is in Indigenous territory or managed by Indigenous peoples, and when payments are made to forest communities or landowners who keep their trees standing. (Conservation International)
🤖 Investing in hardware. Investors have more competition for investments in software than in hardware. “Even if hardware is 2x as hard, the relatively easier access to great teams points to a clear path to better returns,” writes Third Sphere’s Shaun Abrahamson. (Third Sphere)
🤝 M&A impact of ESG. More than half of merger and acquisition dealmakers have canceled deals due to material findings during environmental, social and governance, or ESG, due diligence, according to a KPMG survey. (ESG Today)
Agents of Impact: Follow the Talent
Mark Carney, former Bank of England chief, will chair Bloomberg’s new board of directors (see, “Mark Carney, Agent of Impact”). Bloomberg also announced several promotions, including Vlad Kliatchko to CEO, JP Zammitt to president, and Patti Roskill to chief financial officer… Tides seeks a remote impact investing vice president.
Triodos Bank has an opening for an internal investment associate for catalytic investments… The Nature Conservancy is hiring a remote ocean and climate business innovation manager… Cook Inlet Lending Center is hiring a business lending manager in Anchorage, Alaska… MassMutual is recruiting a head of its First Fund in Boston… Root Capital is on the hunt for a remote senior manager of foundation relations.
The IFC is accepting applications for She Wins Africa, a program that offers training, mentorship and networking opportunities to female startup founders in Africa… This year’s Africa Food Systems Summit will take place in Dar Es Salaam, Tanzania, Sept. 5-8… The 2023 Black Venture Summit will convene Black venture founders and investors in Tulsa, Okla., Oct. 4-6.
Thank you for your impact.
– Aug. 22, 2023
